Bachelor's Thesis THE IMPACT OF COVID-19 ON THE AIR CARGO MARKET IN EUROPE
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Bachelor’s Thesis
THE IMPACT OF COVID-19
ON THE AIR CARGO MARKET IN EUROPE
Institution: Zurich University of Applied Sciences
Department: ZHAW - School of Management and Law
Study Program: Bachelor of Science (BSc) in International Management
Author: Tu Khanh Jacqueline Trieu
Matriculation No.: 17-680-471
Supervisor: Dr. Markus Braun
Submission Date: 5 September 2021
Management Summary
The world faced unprecedented times after the coronavirus pandemic began in
January 2020. With travel restrictions and mandatory quarantine, the aviation industry
suffered immensely, as the majority of airlines had to cancel commercial flights all around
the globe. Medical supplies to treat infected people experienced a vast surge in demand,
which required a rapid transportation mode. Consequently, the rapid delivery of such time-
sensitive products was ensured through transportation via air.
This thesis draws its attention to the impact of COVID-19 on the air cargo market and
the subsequent import and export of goods of Europe. The cargo market heavily depends on
passenger flights, as about half of the total air freight volume is carried by passenger flights.
The drastic reduction of belly capacity caused significant difficulties among the industry, as
the demand for capacity increased rapidly despite supply chain disruptions. However, given
Europe’s extensive roadmap network, road trucking might be another alternative. Hence, the
main objective of this research is to determine whether trucking services can replace the loss
of capacity of air cargo. Subsequently, other types of transportation modes that are viable in
the future after an industry recovery are described.
The essential data were obtained through a literature review on air cargo operations
and the impact of COVID-19 in Europe. To demonstrate the development of air freight during
the past years, market data about air cargo volume in Europe between 2010 until 2020 are
illustrated. Feasible perspectives were conducted empirically through interviews with experts
operating in the aviation industry.
Contrary to the assumption that the increasing road connectivity in Europe led to a
shift from air to road shipments, the considerable amount of secondary data did not indicate
an accurate response to this hypothesis. Consequently, the main conclusions of the thesis are
based on the answers given by the interviewees. Essentially, two conclusions can be drawn
– first, the significant shift from belly-load aircraft to full-freighter fleets. Secondly, the
adaption of the remodeled passenger flights to increase capacity for goods. Concerning the
alternative transportation modes, the findings indicate that sea freight shipments are not the
only reliable alternative, and rail transportation is increasing simultaneously.
Tu Khanh Jacqueline Trieu I|Page
Concluding, the research indicates that improvement is possible in each segment of transportation mode. Most notably, the recommendations for future operations in a post- pandemic era suggest that the railway network in Europe should be expanded to relieve truck traffic. Additionally, sea shipments for non-time-sensitive goods help to maintain the total capacity of the newly remodeled preighters and freighters. Tu Khanh Jacqueline Trieu II | P a g e
Table of Contents
1 Introduction ................................................................................................................. 7
1.1 Problem Statement ................................................................................................. 7
1.2 Research Question ................................................................................................. 9
1.3 Purpose of Research and Outline ......................................................................... 10
2 Literature Review...................................................................................................... 11
2.1 Transportation Modes .......................................................................................... 11
2.1.1 Air Cargo ............................................................................................... 12
2.1.2 Road Freight .......................................................................................... 21
2.1.3 COVID-19 and the Air Cargo Industry in Europe ................................. 25
3 Methodology .............................................................................................................. 30
3.1 Methodological Approach ................................................................................... 30
3.2 Market Data Analysis .......................................................................................... 31
3.3 Interview Structure............................................................................................... 31
3.3.1 Interview Questions ............................................................................... 32
3.3.2 Analysis of Interviews ........................................................................... 34
4 Findings ...................................................................................................................... 35
4.1 Analysis of Market Data ...................................................................................... 35
4.2 Evaluation of Expert Interviews .......................................................................... 37
4.2.1 Theme I – Impact of COVID-19............................................................ 38
4.2.2 Theme II – Alternatives in Transportation ............................................ 43
4.2.3 Theme III – Sustainability ..................................................................... 44
5 Discussion of Findings .............................................................................................. 45
5.1 Distinguishable Shift from Air Cargo to Road Transportation in Europe ........... 45
5.2 Alternatives of Transportation Modes after Recovery of COVID-19 ................. 46
6 Conclusion.................................................................................................................. 49
6.1 Main Conclusion .................................................................................................. 49
6.2 Limitations ........................................................................................................... 50
6.3 Recommendations ................................................................................................ 50
Tu Khanh Jacqueline Trieu III | P a g e7 Reference List ............................................................................................................ 52
8 Appendix .................................................................................................................... 57
Transcript Interview A ......................................................................... 57
E-Mail, Interview B .............................................................................. 72
Transcript, Interview B ......................................................................... 74
E-Mail, Interview C .............................................................................. 81
Summary of Codes and Quotes ............................................................ 84
Tu Khanh Jacqueline Trieu IV | P a g eList of Figures Figure 1: World Trade According to Commodities ............................................................. 16 Figure 2: The Air Cargo Market ........................................................................................... 17 Figure 3: Air Cargo Revenue in 2019 .................................................................................. 19 Figure 4: Position of the Airline in the Value chain ............................................................. 20 Figure 5: TEN-T Core Network Corridors ........................................................................... 23 Figure 6: Air Freight Rate Change in %, Dec. 2019 – Jan. 2021 ......................................... 27 Figure 7: Scheduled Cargo Tonne-Kilometers by Type of Operation in % ......................... 28 Figure 8: International Cargo Tonne kilometer flown ......................................................... 29 Figure 9: Freight Traffic Numbers in Europe, 2010 – 2019 (Euromonitor, 2021)............... 35 Figure 10: Freight Traffic Numbers in Europe, 2019 – 2020 (Euromonitor, 2021)............. 36 List of Tables Table 1: World LCCs, Cargo Acceptance Policy, Examples (Morrell & Klein, 2019) ....... 18 Table 2: The Nine Corridors of the Core Network ( (European Court of Auditors, 2019) .. 24 Table 3: Interview Experts (created by the author, 2021) .................................................... 33 Table 4: Coding Themes (created by the author, 2021) ....................................................... 37 Tu Khanh Jacqueline Trieu V|Page
List of Abbreviations and Definitions
Freight-Tonne-Kilometres, which measure the actual freight traffic and is
FTK / CTK also known as Cargo Tonne Kilometres (CTK). It measures one metric
tonne of revenue load which is flown for one kilometer (Lai, 2014).
The IATA (IATA, n.d.), short for the International Air Transport
Association, represents around 290 airlines or also 82% of total air
IATA traffic on a global level. Furthermore, they assist aviation activities in
many areas, which also include formulating industry policies as well as
critical aviation issues.
The ICAO (ICAO, n.d.) is supported and guided by 193 national
governments in order to assist their diplomacy and collaboration in air
transportation as signatory states of the Chicago Convention (1944). In
ICAO
particular, they are not an international aviation regulator, as they do
not have any authority over national governments in the areas of
international priority they are established for.
According to Bendiksen (2016), there is a distinguishing difference
Integrator between freight forwarders and integrators. In particular, besides
organizing deliveries, they also own the asset, such as FedEx or UPS.
The road feeder service involves the transportation of cargo by trucks,
RFS but instructed by the airlines, from regional airports to bigger cargo
airports (Cieplinska, 2018).
Unit Load Devices are encountered in three different forms on the
aircraft. Either as an aircraft pallet, a pallet-net combination or as an
aircraft container (IATA, n.d.). In particular, those devices are the only
ULD removable parts belonging to an aircraft, which also leave the control
of an airline and return after going through various parties. In addition,
ground handling providers are usually operating the majority of those
ULD’s and pass them on until they return to the airline at some point.
Tu Khanh Jacqueline Trieu VI | P a g e1 Introduction
The coronavirus, a topic which is in everyone’s ears and mouth for more than a year
now. The consequent restrictions from various governments globally have caused many
difficulties for the aviation industry. This thesis is going to be introduced with this chapter,
where the problem statement will be further elaborated as a first instance. The research questions
will be presented in the next subchapter, followed by a short outline of the whole thesis in the
last subchapter of this section.
1.1 Problem Statement
The coronavirus was first detected back in December 2019 and began to spread from
China to other countries in Asia, ending up infecting all parts of the world. The coronavirus,
known as COVID-19, was identified on the European continent, starting from the month of late
February to the beginning of March 2020 (World Health Organization, 2021). As a result, flights
leaving Europe for China had to be canceled beginning as early as January 2020, as the
governments were implementing travel restrictions and social distancing measures
(EU/Schengen, 2020).
On March 11th, 2020, the World Health Organization (WHO) declared the coronavirus
a pandemic, emphasizing over 118,000 confirmed cases in over 110 countries and terrains
around the globe and the consistent risk of a worldwide spread (Ducharme, 2020). The extensive
impact throughout the whole world from March until today was not imaginable from the
beginning. Several restrictions have been enforced on the airline industry which haves
subsequently caused a significant decrease in the number of travelers worldwide. (Niestadt,
2020). Consequently, this will have a long-term impact on the whole industry in which recovery
is not in sight. Due to China’s strict lockdown at the onset of the virus, the global supply chain
has been substantially interrupted and suffered tremendously under the pandemic
circumstances, as the manufacturing and production companies, which are the suppliers for
many businesses worldwide, were forced to stay on hold (Prescott, 2020).
Furthermore, as Niestadt (2020) mentioned, many airlines have combined passenger as
well as air cargo operations into their business strategy. However, due to the impact of this
pandemic, the air cargo operations were proven to create additional revenue during this period,
as people were forced to stay inside and thus pursued ordering online through the e-commerce
Tu Khanh Jacqueline Trieu 7|Pagesector as their only alternative. Additionally, with the rising urgency in research of a suitable
and effective vaccine and the increasing demand for medical supplies, air cargo operations have
been in high demand since the beginning of the pandemic to transport the freight as fast as
possible. Therefore, the air freight division had to be adjusted to this demand by also
reconstructing the passenger compartments into cargo suitable spaces to offer enough supply
for the required demand.
Moreover, due to the fact that the airlines had to react accordingly to the travel
restrictions worldwide, numerous passenger flights had to be canceled. As of April 2020, air
travel decreased by 94% at its peak (The Economist, 2021). As around 50% of the passenger
flights were accounting for the overall cargo volume (IATA Economics, 2020), the capacity of
flights that were offered was simply too low to fulfill the transportation demand. Hence,
alternatives had to be found to serve the European market with goods.
Additionally, as the availability of operating flights was substantially low, an increase in
the freight rate was necessary to compensate for the loss from the passenger business. However,
as land transportation serves as one of the alternatives for the European market, it has also been
heavily affected by restrictions, such as closed borders from various countries, sanitary
measurements, and long waiting hours along the way. Nevertheless, land transportation did not
have to deal with such severe shocks compared to air freight operations (World Trade
Organization, 2020).
Tu Khanh Jacqueline Trieu 8|Page1.2 Research Question
Following the introduction given in the previous chapter, this paper will analyze the
development of the following two transportation modes: air cargo and road freight. The import
and export of goods in Europe during the pandemic will be examined since the air freight traffic
within Europe is nearly non-existent due to the distinct network on the surface. As the travel
restrictions have not only limited cargo operations in Europe but also globally, alternatives had
to be found in order to maintain the transportation chain. One alternative to air freight is the
road transportation mode, which has established itself as a strong and reliable method in the
European region. Moreover, as this region is predominantly connected via the mainland, all
European countries can therefore be served on land. However, one must not forget, besides
posing limitations on air cargo operations, the pandemic also impacted road transportation, as
road freight operators had to face similar restrictions due to unexpected lockdowns.
While the majority of freight in Europe is transported as a side business on passenger
fleets, alternatives had to be found to still maintain the supply chain and deliver the desired
supplies. Therefore, a hypothesis is proposed which claims that there was a shift from the air
cargo market to the road freight sector, as passenger flights were not operating anymore.
Accordingly, two specific research questions are addressed throughout this bachelor
thesis:
1. Was there a distinguishable shift from the air cargo to the road freight operations in
the European market visible as a consequence of COVID-19?
2. What kind of alternatives in the transportation sector are possible and sustainable
for the European market after the economy has potentially recovered from COVID-
19?
Considering the market data, a logical and obvious conclusion should be reached. With
the questionnaires administered to the interviewees and their responses, the writer’s opinion
might either remain unchanged or change under the influence of the expert’s inputs. That
information will be used to further draw scenarios and develop a recommendation for cargo
transportation in Europe for the future.
Tu Khanh Jacqueline Trieu 9|Page1.3 Purpose of Research and Outline
In accordance with the previously mentioned research questions, the purpose of this
bachelor thesis is to find out if a distinguishable shift from air cargo to road freight operations
happened as a result of the impact of the coronavirus. Also, if there are other opportunities and
alternatives possible for companies, using other transportation modes than air cargo after the
potential recovery of this crisis. Considering the current circumstances, the recovery of this
crisis is comparable to a rollercoaster ride. There have been improvements, significant
improvements in different countries where nations were put into complete lockdowns and were
able to go back to normal reality, such for example Australia (Australian Government
Department of Health, n.d.) or New Zealand (Ministry of Health, n.d.). But also, setbacks, such
for example the continent Europe (European Centre for Disease Prevention and Control, 2019)
with high rising numbers starting again from October 2020.
However, from the beginning of this crisis, the air cargo operations owned a very high
position, as they were the only carriers offering the ability to transport medical supplies as fast
as possible to desired destinations worldwide. Thus, understanding the importance of air cargo
operations as well as its connectivity to road freight transportation is a crucial objective in order
to understand the impact of the coronavirus as well as the imposed restrictions and
measurements imposed by numerous governments on the globe. Finally, only by knowing the
current status of innovations and developments in response to the crisis, one can potentially
predict if a shift indeed happened from air to road and what kind of alternatives are possible to
potentially predict future opportunities for the transportation sector in Europe.
This bachelor thesis is organized as follows. Chapter two provides a brief overview and
introduction about the main transportation modes with e deeper focus on air cargo, the connected
importance of trucking as well as an oversight about the coronavirus in Europe. Furthermore,
chapter three describes the methodology of this paper divided into two different parts and
approaches. Chapter four covers the findings, which on one hand delivers the analysis of the
market data and on the other evaluates the conducted interviews more thoroughly. Followed by
chapter five with a discussion about the findings, where the results are critically questioned.
This thesis closes up with the conclusion in chapter six, followed by the references in chapter
seven as well as the appendix in chapter eight, containing all interview transcripts as well as the
respective coding table.
Tu Khanh Jacqueline Trieu 10 | P a g e2 Literature Review
To further understand the importance of the different transportation modes in the global
supply chain, this thesis demonstrates various aspects of the two main means of transportation
in the following chapters. This chapter is structured as follows: Firstly, an overview of the four
main shipping forms will be given. Afterward, a deeper dive into the air cargo operations will
provide a summary of its characteristics and benefits as well as disadvantages. Furthermore, the
importance of trucking in the aviation sector, as well as its network in the European region, will
be illustrated. And finally, the impact of the coronavirus and its responses from the airline
industry will be provided as a last subchapter in this section.
2.1 Transportation Modes
Three terms play a central role in the topic of this Bachelor’s thesis: logistics,
distribution, and transport, where their meaning can differ in many ways, conditional on the
context they are used in.
According to Bektas (2017, p. 3), and for the purpose of this thesis, each can be defined
in the following manner. Transport refers to the physical act of moving a certain good from its
starting point to its destination, combined with the usage of a selected transportation vehicle as
well as a transportation infrastructure. Distribution is defined by all activities which are related
to the physical placement of goods (hence it is inclusive of transportation on one side and
warehousing on the other). Lastly, logistics is a term that is normally used to describe the overall
process involving all relevant activities to move a good from one location to its final destination,
factoring in the processes of production and distribution as well. Bektas (2017, p. 1) also held
that movement should not only be understood in the terms of physical movement but also as the
flow of information. This also helps to ensure that customers’ requirements are met in the most
efficient way (Murphy Jr. & Knemeyer, 2018, p. 21).
As mentioned above, there are several means or modes of transportation possible: by air
(using cargo planes), land (including road, rail, and off-road), as well as by water (either on
ships in the oceans or barges on rivers) (Bektas, 2017, p. 3). According to Murphy and
Knemeyer (2018, p. 224), air cargo is an expensive mode of transportation, where freight is
transported either in the belly of a passenger plane or in full freighters. Most suitable goods
Tu Khanh Jacqueline Trieu 11 | P a g ewhich are transported by air are either high in value, require urgent or a time-specific delivery,
or are considered as perishable goods.
As claimed by Bektas (2017, p. 3), the most commonly used mode of transportation
mode has been and continues to be road transport. The main reason for its popular reputation is
the offer of a very quick service as well as being flexible and available on demand. However,
according to Sarder (2021, p. 19), transporting shipments by truck is relatively low in cost but
has to abide by multiple regulatory guidelines depending on the region they are operating in.
Another type of land transportation next to road transport is rail. As stated by the author (Sarder,
2021, p. 20), this mode of transportation is chosen by companies who need to transport their
goods over long distances and are not concerned about the time frame. Furthermore, it is offered
at a low cost, is efficient as well as environmental-friendly.
As Pilkington (2020) claimed, sea freight is a means of transportation to move large
amounts of goods by using carrier ships, where goods are loaded in containers, which are
afterward loaded on vessels. While typical cargo ships can transport around 18,000 containers
at once, it is the type of transportation that is not only cost-efficient but also able to carry high
quantities over a long distance. However, as the author (Pilkington, 2020) mentioned one of the
disadvantages of this method is time, as it requires the most amount of time as it is the slowest
opportunity to transport goods.
However, as highlighted before in the research question, this thesis concentrates solely
on two specific transportation modes, such as air cargo and road freight, which will be further
explained in the next chapters.
2.1.1 Air Cargo
According to O’Connor (2001, p. 153), the term air cargo is commonly used in a broad
sense, including virtually everything that fits into a cargo compartment of either a passenger
aircraft or a full freighter. While it operates as a side business compared to the passenger
business, the status of air freight should not be mistakenly underestimated. There are some
distinguishable characteristics between the cargo as well as passenger business available; while
air cargo is practically always one-way, passengers do usually own a roundtrip ticket. Moreover,
air cargo is a passive object which needs to be physically moved, loaded, and unloaded whereas
a passenger can move by himself. Many manufacturers are relying on the delivery of its
Tu Khanh Jacqueline Trieu 12 | P a g ecomponents, as they can be time-sensitive rather than price-sensitive or are considered as a
perishable good that needs to be transported far away in a short amount of time.
2.1.1.1 Air Cargo as a Transportation Mode
Living in a world where time dictates our daily lives also has a high significance in the
global supply chain. As Sales (2016, p. 2) states, in almost every type of modern industry and
business, goods can be transported in many ways, some of which may take longer than others.
Therefore, integrated connectivity is an important factor for the global supply chain.
Sales (2016, p. 5) mentioned the effect of the introduction of the internet which has
changed the manufacturing and distribution behavior worldwide. Not only does the “I want it
now” culture demand a very short reaction time of all involved parties, but it also results in a
higher demand for optimal efficiency in terms of distribution and delivery of the product. The
air cargo industry had to adapt to those fast-moving changes as well. Those changes have been
connected to new rules, technologies, as well as market demands. Nevertheless, the security
level has been improved continuously which can lead to a slower processing time of handling
goods.
Nevertheless, a certain group of goods can take time to be delivered, whereas different
others need a quicker solution (Sales, 2016, p. 6). Examples are fruits and vegetables, electronic
or electrical equipment, or machines (Murphy Jr. & Knemeyer, 2018, p. 225). Sales (2016, p.
6) found that air cargo operations offer the following selling points to the supply chain:
• Just-in-time (JIT) production cuts the amount of inventory and cost-intensive
warehousing due to fast transportation time.
• For some goods, delivery time is crucial as the value of the shipment is either
high or exposed to the risk of theft, counterfeiting, or temperature sensitivity.
• Fast delivery time of certain spare parts is substantial to maintain a mechanical
process running. The longer the machines are out of order, the more losses are
going to be generated.
• Pharmaceuticals and perishables need rapid and temperature-controlled
surroundings. However, the requirements for the health regulations have to be
fulfilled at the same time.
Tu Khanh Jacqueline Trieu 13 | P a g eThe authors Budd and Ison (2017, p. 252) described the air cargo operation as the most
suitable method to transport your goods from your starting point to your destination if you are
under time pressure. Additionally, combined with the time pressure, if your product is
dimensionally too large and transport by rail or road is not possible, then airfreight is your only
option. Needless to say, for shippers who choose air cargo as their transportation mode, speed
is crucial and this comes at a price (Sales, 2016, p. 6). Thus, the demand for air cargo depends
on goods that not only require a speedy transportation mode but also demonstrate a cost
advantage compared to alternative modes of transportation (Holloway, 2008, p. 535).
However, air cargo operation also has essential aspects which need to be considered
before deciding if the air freight method makes the most sense to transport a certain good.
According to Budd and Ison (2017, pp. 251-252), the following key characteristics play a
significant role in determining whether or not a product should be shipped by air.
Firstly, the high value-to-weight ratio: As space is very limited on aircraft, airlines are
calculating their charges based on the cargo’s dimensional as well as volumetric weight. Hence,
while heavier products are determined based on their actual weight, less dense products (which
consume substantial space) will be very costly to be shipped by air, regardless of the lower
weight. Secondly, as mentioned previously, time is a very important aspect in the whole air
cargo operations. Time-sensitive products have a drastic decrease in their value as the time
horizon decreases. For instance, fresh products (such as seafood or certain pharmaceutical
products) have a limited shelf life and deteriorate over time.
The last key characteristic is determined by the uncertain demand. Sometimes it is
unavoidable that parts in a company’s operation break down and the only opportunity to repair
the machines is only possible through ordering a certain part, which is located in another country
or even on another continent. However, as air freight offers the fastest means to get those
required parts delivered, one has to accept the high costs of transporting the necessary parts by
air.
Nevertheless, even if one product corresponds with all those different characteristics, it
may still not be shipped by air. The distance between its origin and destination, relative speed,
as well as the degree of difficulty posed by the transportation mode itself need to be taken into
Tu Khanh Jacqueline Trieu 14 | P a g econsideration. If either rail or road is deemed more cost-effective as well as faster than air, these
methods will most likely be preferred over air freight.
2.1.1.2 The Variety of Commodities
According to Boeing (2020, p. 14), there is a range of different transportation modes
available in order to deliver a certain good from its starting point to the destination. However,
shippers are only able to choose between two options for intercontinental freight, namely air
and maritime. While maritime transport offers a benefit in regards to low cost, it also has its
disadvantages (Boeing, 2020, p. 14), which is the duration its transports take to arrive at the
destination. In particular, the authors (Häberle & Stölzle, 2020, p. 23) mentioned the transport
by air profits from speed as well as reliability, making airfreight the most rapid method of long-
distance transports on an intercontinental level and enjoys the indispensable status for many
companies. Comparing the volume transported, the world maritime sector transported around
11.9 billion tonnes, whereas the air cargo industry accumulated to 60.9 million tonnes (Boeing,
2020, p. 14).
Given the following graph (Figure 1) provided by Boeing (2020, p. 14), it is visible that
maritime transportation takes up a big part of the commodities, which use dry as well as liquid
bulks to transport raw materials and other bulk items. Unlike iron and oreas of other metals,
coal, grains, and cement are transported in dry bulks; items such as crude oil or petroleum are
carried in specified liquid bulks and therefore account for the biggest part of the world trade
tonnage.
Tu Khanh Jacqueline Trieu 15 | P a g eWorld Trade is Focused
on Bulk Commodities
Dry Bulk
46%
Liquid Bulk
35%
Containership Commodities
13%
General Cargo
5%
Air Commodities
1%
Source: (Boeing, 2020) 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Figure 1: World Trade According to Commodities
Even though air freight only entails less than 1% of the world trade shipments by
tonnage, it represents around 35% of global trade by its value (Shephard, Shingal, & Raj, 2016;
p. 2 Boeing, 2018, p. 7). Those discrepancies between the value and tonnage can be explained
by air freight’s exclusive position in transporting time-sensitive, reliable, and secure goods. For
instance, machinery, computing equipment, and electronic devices make up the highest share of
airborne trade tonnage in comparison to the containership tonnage (Boeing, 2018, p. 7).
According to another report from Boeing (2020, p. 14), other classified air commodities
include perishables, pharmaceuticals, and high-value electronics. Furthermore, wood products,
perishables, automobiles, and specialty chemicals consist of the general cargo category.
Consumer goods, machinery, textiles, fruits, and vegetables are transported by containerships.
Moreover, natural resources such as crude oil, petroleum products, liquefied petroleum gas,
liquefied natural gas, and other liquids are transported in liquid bulks (more specifically in the
form of iron and ores of other metals, coal, grains, and cement in dry bulks. The majority of
these commodities, such as grains, metal ores, and oil are low in value, non-time-sensitive, and
therefore shipped by sea in dedicated bulk carriers.
2.1.1.3 Types of Methods to Transport the Air Commodities
According to the authors Morell and Klein (2019, pp. 82-83), the air cargo market can
be separated into six different segments as the graph below (Figure 2) displays:
Tu Khanh Jacqueline Trieu 16 | P a g eScheduled
All-Cargo
Carriers
Charter
Passenger
Cargo
Airlines
Carriers
Air Cargo
Market
Combi-
Integrated
nation
Carriers
Carriers
ACMI
Providers
Source: (Morrell & Klein, 2019)
Figure 2: The Air Cargo Market
Scheduled all-cargo carriers solely operate as freighters as their main business and are
hence specialized in the transport of air freight operations. Therefore, those carriers plan their
schedule and sell their capacity based on the current air freight demand and are therefore
independent of the influence of the passenger operations.
Charter cargo carriers do not have a scheduled network as their field of operations
mainly relates to ad-hoc projects, disaster relief, military charters, and providing remote airport
support. Integrated carriers like UPS and FedEx have been developed from the parcel services
and operate all-cargo fleets coming in various sizes.
ACMI providers operate passenger or freighter aircraft in the name of other airlines. For
this service, the aircraft, crew, maintenance, as well as insurance are covered by the lessor, who
is also responsible for the fuel, landing, handling, and overflying. This service is also known
under the definition of “wet-lease”. Moreover, combination carriers are airlines that offer and
operate both types; on one hand, it operates the passenger aircraft and on the other, it is
responsible for maintaining all-cargo fleets).
Finally, passenger airlines are carriers, which solely serve passenger aircraft and set
their focus on selling the capacity of their belly compartment of those passenger aircraft as a
side business. They account for around 20% of the international as well as domestic air cargo
market, whereas they are responsible for only about 10% of the industry revenue. However,
Tu Khanh Jacqueline Trieu 17 | P a g ealmost all airlines that transport passengers also transport air cargo in the lower compartment of
the passenger fleet.
Morell and Klein (2019, p. 87) found exceptions, such as European low-cost carriers
(LCCs), who do not want to be confronted with the complexity of air cargo operations or
regional airlines, whose space is limited onboard of their aircraft. In Table 1 (Morrell & Klein,
2019, p. 88), examples of low-cost carriers in Europe are presented, illustrating their respective
cargo acceptance.
Table 1: World LCCs, Cargo Acceptance Policy, Examples (Morrell & Klein, 2019)
Airline Cargo Acceptance
Ryanair No
easyJet No
Vueling No
Norwegian B737 / B787
Wizz Air No
Generally, the authors Morell and Klein (2019) found that the European LCCs turn out
to be more cautious about air cargo operations compared to other regions such as America, Asia,
or the Middle East, in which airlines such as Southwest, JetBlue, or AirAsia offer cargo carriage
services (p. 88). Several LLCs consider air freight in their business portfolio. However, the
following examples demonstrate the reason why this kind of operation has still not been
included. EasyJet tested the connection departing from London Gatwick back in 2010;
Hungarian’s Airline Wizz Air tried to analyze the inclusion of air freight operations into their
business but was not able to find a suitable match for this activity. The only exception is
Norwegian which offers air cargo carriage on the fleet of its long- as well as short-haul flights
in operation using aircraft types Boeing 737-800 and B787.
During the application process concerning marginal pricing as well as assigning various
costs for the operation of the aircraft (such as crew, maintenance, overflying, landing, fuel, and
handling costs) to the passenger business, belly-operators can serve the market with aggressive
rates. For instance, depending on the selected route, price of fuel, and aircraft type, the marginal
Tu Khanh Jacqueline Trieu 18 | P a g ecost for one kilogram of freight transported on a passenger flight can be as low as 1/3 of the full
price charged by another freighter service. Nonetheless, the choice of destinations and schedules
of passenger flights depend on the demand by passengers and not by cargo. Hence, cargo
departments who offer cargo carriers have to lower their rates to generate demand on poor
freight routes which ultimately explains the low cargo load factors on passenger flights in
comparison to freighters as well as its lower revenue contribution of passenger airlines.
Nevertheless, Morrel and Klein (2019) stated, that while some airlines have never operated a
full-freighter, others were rather unsuccessful and had to reduce their freighter aircraft as a
consequence of the recession in 2009 to put their focus more on the lower-deck capacity of their
passenger aircraft (p. 87).
However, as Boeing (2020) highlighted, there are two different opportunities for air
cargo transportation, either full-freighters or the lower compartment of a passenger flight, both
of which offer their advantages to involved parties (p. 9). Freighters are especially suitable for
high-value goods as the transportation runs under an extremely controlled environment, direct
routing options, reliability, and exclusive capacity applications. Those mentioned advantages
allow airlines who operate freighters to offer a higher value of service standards while
accomplishing more than 90% of the total revenue in the air cargo industry as shown in the
following graph (Figure 3).
$106bn
Source: (Boeing, 2020)
Figure 3: Air Cargo Revenue in 2019
Tu Khanh Jacqueline Trieu 19 | P a g eAccording to a forecast provided by Boeing (2018), the available network, and therefore
the routes for freighters, are highly concentrated on a relative scale, available for only specific
trade lines. The two longest trade routes are on one hand East Asia and North America, and on
the other East Asia and Europe. On the contrary, passenger networks appear on a much broader
level and are oftentimes offering destinations where the cargo demand is rather small. Those
discrepancies between the passenger and air cargo traffic distribution explain the difference in
load factors in belly space and freighters, which equate to, on average, 30% respectively 70%
(p. 8).
Forecasts accounting for the future innovation of a new generation of widebody aircraft
(offering larger capacities in the lower compartment) have the consequence that more and more
airlines combine cargo transportation with their passenger operations to increase additional
revenue opportunities. Those services offer a distinct value on non-cargo routes by filling
dedicated freighter networks and administer new business occasions. Nevertheless, while the
number of lower-hold capacity on long-haul flights in widebody airplanes increased by almost
6% in the past five years, the following limitations affect the cargo operations in the passenger
aircraft:
• Reduction in height of lower deck can limit volumes
• Several security regulations and standards may restrict certain commodities to be
transported on passenger flights
2.1.1.4 Position of the Airline in the Value Chain
Morrell and Klein (2019, p. 83) described the attributes of cargo airlines in the following
graph (Figure 4), which demonstrates the position of the airline in the value chain.
Source: (Morrell & Klein, 2019)
Figure 4: Position of the Airline in the Value chain
The authors stated that, because shippers and consignees are typically not located at the
airport, air freight is operating on a multi-modal or inter-modal level by its nature (Morrell &
Klein, 2019, p. 45). This is ultimate because the shipments move from their origin to their
Tu Khanh Jacqueline Trieu 20 | P a g edestination by various modes of transports, where every single mode has another carrier who is
responsible. Traditionally, shipments are picked up and transported to an airport through a
forwarding company, where the shipment is getting palletized and loaded to the respective
aircraft. Afterward, the airline flies the freight to the destination airport, where the pallets are
offloaded, broken down, and distributed to their respective destination in combination with the
trucking service. Those trucking services operate under either a forwarding company or a flight
number since this service is on the order of the airline (Morrell & Klein, 2019, p. 82).
As stated by the authors Heinitz, Hirschberger and Werstat, (2013), a rising part of
airfreight is also transported by road, either during the delivery or pick-up of the goods at the
airport which is integrated into the process. However, there are also truck services operating
under substitutive freighter flights (namely “airline trucking”, “road feeder service (RFS)”, or
“truck flights”) and that have a recognizably related flight number. As Häberle and Stölzle
(2020, p. 16) found, those RFS are used as a feeder or defeeder service, either through space or
cost incentives or under the circumstance that direct routes from individual airports are not
feasible. This allows smaller airports to be linked to the international freight network via bigger
European Hubs.
2.1.2 Road Freight
As shown in the previous subchapter, the trucking operation plays a significant role in
transporting goods to and from the airports.
2.1.2.1 The Importance of Trucking
According to Bektas’ textbook (2017, p. 3), by defining the road transportation mode, it
is a remarkable fact to mention that this method has been the most extensively used one on a
domestic as well as a global level. The book found the main reason behind its high reputation is
the ability to provide particularly fast service as well as the flexibility on being available on
demand. The wide diversity of vehicles that are used are based on the size, capacity, weight as
well as the type of energy. Another important aspect is the different kinds of road networks as
well as the different regulations which are valid and counting in the respective countries those
vehicles are passing by along the way. The author stated, that law enforcement not only restricts
the driving and working hours but also regulates the driving time and obligates the drivers to
take their mandatory breaks on a long-haul drive (Bektas, 2017, p. 4).
Tu Khanh Jacqueline Trieu 21 | P a g eSales (2016) claimed that trucking has gained high significance and is a vital part of the
supply chain by delivering the shipments from the shipper’s production site to the airport for
the following exports or in the reverse orientation for the import. However, more than half of
air cargo in Europe is traveling on designated vehicles to efficiently move the complete ULD’s,
which is allowing the minimization of costs as well as ensures that the temperature is controlled
in case of perishable or pharmaceutical goods (p. 69).
The author (Sales, 2016) also described how meaningful trucking services are for
keeping the global supply chain running, by illustrating the example of Iceland, where its
volcano started to erupt in March 2010 (p. 69). In this case, the air traffic in the European
network was standing still and the airlines were forced to keep their fleets on the ground to
prevent any further catastrophe. Powerless to transport the goods by air freight, forwarders such
as DHL, were trucking their goods to Turkey, where the ash cloud had not reached the land so
far, in order to catch the next available flight abroad (Sales, 2016, p. 69). Such spontaneous and
situation-related adjustments are only possible with flexible transportation modes (Bektas, 2017,
p. 3).
2.1.2.2 Road Connectivity of Europe
According to a report from the European Commission (2019), transportation is an
essential sector of the European economy, as it contributes to both the economic growth and
movement of people and goods. While roads are the main transportation mode of freight
transport, as well as the inland passenger in the European Union, building additional
infrastructure as well as maintaining the whole road network to make the roads more accessible
is essential for encouraging economic growth. Nevertheless, the network in some parts of the
continent is still incomplete. For instance, the member states of central and eastern Europe are
not well-operated by the east-west connections, not to mention the lack of connectivity between
those regions (p. 4).
Furthermore, the report described a project (which started back in 1996) where the
commission delivered guidance for the development of the TEN-T (Trans-European Transport
Network), which has been amended in 2013, serving as the main strategic and implementing
tool for the further development of this network (European Court of Auditors, 2019, p. 4).
According to two other sources Euro Access Macro-Regions (n.d.) and the European
Commission (n.d.), this network was designed to aim the connectivity within Europe. The EU
Tu Khanh Jacqueline Trieu 22 | P a g eintends to build the core network until 2030, including inter alia and the expansion of cross-
border connections as their focus. Furthermore, this network will be completed with a
comprehensive network covering regional and national road networks to secure the connection
between all involved parties.
Source: (European Commission, n.d.)
Figure 5: TEN-T Core Network Corridors
The previously mentioned network is shown in the graph above, where nine core
network corridors are represented, which cover almost the entire core network. Breaking those
corridors down to their different coloration (European Commission, n.d.), the Atlantic corridors
are yellow, followed by the green line to the Mediterranean. The middle marked in orange
demonstrates the Rhine-Alpine route while being connected to the red corridors, the North Sea-
Baltic. The purple corridors represent the North Sea-Mediterranean, while the pink line
demonstrates the Scandinavian Mediterranean. Furthermore, the darker blue corridor connects
the Baltic to the Adriatic while the light-blue line is the Rhine-Danube. Finally, the brown
corridor connects the Orient-East-Mediterranean.
Tu Khanh Jacqueline Trieu 23 | P a g eFor the road transportation mode, the main indicator which is used by the commission is
the total amount of km meeting the criteria for motorway or expressway road types.
Furthermore, the length, as well as meeting criteria for such road classes, are further displayed
in the following table (Table 2):
Table 2: The Nine Corridors of the Core Network ( (European Court of Auditors, 2019)
Corridor Length of corridor road Meeting criteria for road
infrastructure class
(motorways/expressways)
Atlantic 4’400 km 99%
Mediterranean 5’500 km 98%
North Sea-Baltic 4’100 km 70%
North Sea-Mediterranean 4’200 km Fully compliant except for
some last-mile connections
to ports
Rhine - Alpine 1’700 km Only one section not
compliant
Scandinavian – Mediterranean 6’300 km 99%
Baltic – Adriatic 3’600 km 84%
Rhine – Danube 4’500 km 77%
Orient-East-Mediterranean 5’400 km 88%
However, as the European Commission (n.d.) states, on one side road transportation is
regulated in the European Union and therefore based on common EU regulations. Although on
the other side, there are countries that are not member states of the EU and hence count as a
non-EU country. Those countries have bilateral agreements with the participating member states
of the European Union. The author mentioned the following two agreements are essential as
they further expand the whole European road transportation network:
• The agreement on the European Economic AREA (EEA Agreement) in terms of
transport with Norway, Iceland, and Liechtenstein
• The agreement on land transport between the European Union and Switzerland
Tu Khanh Jacqueline Trieu 24 | P a g eIn particular, the EEA Agreement expands the internal EU market to Norway, Iceland
as well as Liechtenstein. In relation to road transport, this enables the application of the EU road
transport rules just like any other EU-member state to those three mentioned countries.
Moreover, the report from the European Commission (n.d.) found that the land transport
agreement with Switzerland is not only covering goods to be transported by road and by rail,
but also passengers. The agreement has been implemented back on July 1st, 2002, and aims to
fully deregulate access to all involved parties in the transport markets. Concerning road
transportation, in particular, forwarders either from the European Commission and Switzerland
are already mutually eligible to operate between a member state of the EU and Switzerland. This
agreement is an important one as almost 50 percent of all goods (which are transported between
the EU and other third-world countries by road, including Switzerland). As of January 2005,
Switzerland has adjusted the maximum allowed weight to 40 tons according to EU norms.
2.1.3 COVID-19 and the Air Cargo Industry in Europe
The following two subchapters will cover the impact of the Coronavirus on the air cargo
market as well as the subsequent reactions of the airlines in Europe to keep their operations
running. As the majority of passenger flights had to be canceled, alternatives had to be found to
keep the global supply chain running.
2.1.3.1 The Influence of COVID-19
As Niestadt (2020) described in a report from the European Parliament, as a result of the
quickly spreading virus, various governments had to react and consequently took a variety of
restrictive measurements. Those restrictions had a huge impact on air transport, as they included
travel and flight bans, quarantines, lockdowns, and local shutdowns to enforce social distancing.
However, according to Eurocontrol (2020) statistics, Europe has proven to be one of the most
affected regions worldwide. The number of passenger flights in the European airspace decreased
by nearly 90% from March to April 2020 compared to the same period in the previous year. For
example, the capacity of the routes from Europe to North America went down by 52% and 30%
from Asia Pacific to Europe (Flexport, 2020).
According to Buyck (2020) due to the increasing demand for medical supplies, airlines
implemented strategies to continue the transportation of cargo and maintain the global supply
chain. However, sometimes those airlines had to face uncooperative governments. Hence the
Tu Khanh Jacqueline Trieu 25 | P a g eEuropean Commission supported IATA by requesting new guidelines in order to keep the
transportation chain flow. As part of the new procedure, member states of the European Union
are asked to authorize momentary traffic rights for further cargo operations from external EU
restrictions, even if those operations were conducted with a passenger fleet.
Furthermore, mentioned in a study conducted by Häberle and Stölzle (2020, p. 74), more
than 50% of the world’s air cargo is carried as belly capacity on passenger flights, which poses
a direct link between the grounding of passenger aircraft and the preservation of air cargo
operations. In particular, with the implementation of political measurements concerning the
corona crisis, air cargo operations have rapidly moved into the spotlight as an essential
transportation mode to deliver the demanded supply of urgently needed goods. As a result, the
steep increase in demand for protective supplies confirms the great importance of air cargo under
time-sensitive and long-distanced circumstances (O'Bryne, 2020).
Another consequence was the increasing air freight rates caused by the limited capacity
of operating passenger flights. As the following graph (Figure 6) from Statista (2021), which
used data from Air Cargo News, illustrates on an example of different routes, air freight rates
drastically increased beginning March 2020 and reached their peak in May 2020, followed by
another decrease in July 2020. However, by that time, more passenger flights were available.
According to IATA (2020), the further increase at the end of the year was due to, once again, a
surge in COVID-19 cases which led to renewed lockdowns and restrictive measurements.
Tu Khanh Jacqueline Trieu 26 | P a g eAir Freight Rate Change
since the Beginning of COVID-19 Outbreak
9.
7.73 7.37 7.5
8.
7.
5.38 5.59
6.
5. 5.88
4. 5
3. 3.71 4.05
2.
1.
0.
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2021
Frankfurt - North America Hong Kong - Europe Hong Kong - North America
Source: (Statista, 2021)
Figure 6: Air Freight Rate Change in %, Dec. 2019 – Jan. 2021
2.1.3.2 The Reaction of the Air Cargo Industry in Europe
In reference to an article (The Economist, 2021), since the airlines had to react
accordingly to the travel restrictions worldwide, numerous passenger flights had to be canceled.
In particular, as of April 2020, air travel decreased by 94% at its peak. As around 50% of the
passenger flights were accounting for the overall cargo volume, the capacity of flights that were
offered was simply too low to fulfill the transportation demand. Thus, alternatives had to be
found to serve the European market with goods.
According to a report of IATA Economics (2021), airfreight has proven to be a strong
player while simultaneously delivering critical supplies all over the world. As already mentioned
in the previous paragraph, the heavy reduction of passenger flights caused a limitation of
capacity. As a result of these constraints, a considerable number of airlines reconstructed their
passenger aircraft in order to use the space for cargo-only flights, which have been referred to
as “preighters”. This term has been framed by German’s Lufthansa, who were not the only ones
in the European region, as stated by the writer (McWhirter, 2020) in an article.
In particular, further European airlines such as Swiss International Airlines, Austrian
Airlines, KLM as well as LOT Polish Airlines, reconstructed their passenger fleets into
preighters. Worth mention is the Polish Airline, LOT, which transformed a Dreamliner into a
Tu Khanh Jacqueline Trieu 27 | P a g esingle cargo-only flight and hence collaborated with India’s GSSA Group Concorde, operating
from Delhi to Warsaw, in order to transport 53.5 tonnes of pharmaceutical products and auto
parts (SeaNews, 2020).
Hence, next to loading the belly hold, the passenger cabin is used for additional cargo
space to fill the capacity gap (IATA Economics, 2021). Nevertheless, the report shows that the
largest share of cargo is transported by freighters, who have witnessed an increase in traffic
despite limitations posed by a shortage in capacity.
Scheduled Cargo Tonne-Kilometers by Type of Operation
Europe - Asia
2020 74 14 12
2019 55 45
Freighters Preighters Passenger
Source: (IATA Economics, 2021)
Figure 7: Scheduled Cargo Tonne-Kilometers by Type of Operation in %
The graph (Figure 7) from IATA Economics (2021) illustrates that despite freighters and
passenger aircrafts having virtually an even share in 2019, there was a shift in this trend in 2020;
not only did the number of freighters increase but also newly adjusted preighters gained
attention, leaving the passenger flights with a small section of the whole capacity.
One example of a European Airline that modified its passenger fleets to cargo-only
flights is Swiss International Airlines. As the company (Swiss World Cargo, 2020) explained,
economy seats from three Boeing 777s were remodeled into cargo-only flights to meet the
increasing demand for air cargo capacity. For this matter, more than 800 seats were removed at
Zurich airport to ensure the consistent and regular delivery of goods. Therefore, being able to
support Switzerland to optimally maintain the connection between the domestic and
international market.
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